How to Surprise-Proof the Medicare Surcharge

At that point, the top bracket hits $689.90 per month in Part B premiums alone.

The structural issue is the two-year lookback. Medicare uses your most recently available tax return to set premiums — so 2026 premiums are based on 2024 income. Clients who retired in 2025, completed a significant Roth conversion or sold a business are now paying surcharges calculated on income they no longer earn.

They didn't do anything wrong. The system just works this way.

Many clients have been blindsided by this mismatch — not because they failed to plan, but because the planning conversation happened without factoring in the Medicare premium clock.

Common Triggers That Advisors Miss

Four situations account for most of the IRMAA surprises we see in practice.

— Roth conversions are the most frequent culprit. A client in a favorable bracket year converts $150,000 to Roth — entirely reasonable tax planning. But that income gets captured in MAGI, and two years later, Medicare sends a surcharge notice that feels completely disconnected from the original decision. While the conversion may still be worth doing, the question is whether the client understood that the premium cost was part of the math.

— Large capital gains, from a portfolio rebalancing, real estate sale or concentrated position exit, create a similar problem. The client's ongoing income hasn't changed, but the single-year MAGI spike lands them in a higher IRMAA bracket for two years.

— Severance packages catch pre-retirees off guard. A client who leaves their employer at 63 with a severance payment may start Medicare at 65 paying surcharges based on a year when they were arguably overpaid. The situation resolves on its own, but the premium shock hits at the worst possible moment in the transition.

— Business sales or partnership distributions are the quietest trigger. A client who spent years building a business finally sells or winds down their ownership interest. The recognition event spikes MAGI in ways that don't repeat — but IRMAA doesn't know that. It just sees a number.

The Underused SSA-44

When income drops with a qualifying life-changing event — retirement, work reduction, divorce, death of a spouse, loss of pension income or employer settlement — clients can request that Social Security use more recent income to recalculate their IRMAA. The form is SSA-44, and it exists because the two-year lookback creates predictable mismatches for newly retired clients.

This matters most for clients who retire mid-year and then enroll in Medicare before their first full year of retirement income shows up on a tax return. Clients who stopped working in 2025 won't have a 2025 return to show until well into 2026 — but they can submit an income estimate with supporting documentation and ask the Social Security Administration to use it instead. If approved, the surcharge adjusts going forward.

The catch: Documentation has to be clean. Retirement letters, final pay stubs and a complete income estimate with supporting records are the baseline. Incomplete filings slow everything down or result in denial.

Building a Workflow to Prevent the Call

The best IRMAA conversation happens before the premium notice arrives. Here's how to structure it.

First, flag the lookback window for every client approaching Medicare eligibility. Any income event in the two years before enrollment becomes fair game. Roth conversion discussions, rebalancing decisions and business transition planning all need a line item for Medicare premium impact.

Second, document the conversation. If a client decides to proceed with a conversion or sale knowing it will trigger IRMAA, note it in the file. Not because you need protection — because clients forget. When the notice arrives two years later, the file should show that they understood and agreed.

Third, set expectations about what you can and can't do. We can model the surcharge. We can time income events to minimize exposure in high-threshold years. We can help clients file SSA-44 when the situation qualifies. What we can't do is eliminate a surcharge that's the direct result of a decision the client made.

Framing that clearly in advance keeps the relationship intact when the notice lands.

Jeff Judge is a managing partner at Chesapeake Financial Planners, a financial planning practice that specializes in developing personalized strategies for closely held business owners, public/private corporate management, pre-retirees and retirees.